On 1/13/11, after the close, S&P announces that France was downgraded one notch while Italy and Spain were both downgraded two notches each. S&P says the outlook remains negative moving forward and a 1 in 3 chance remains for further downgrades this year. S&P also cited the failure of the 12/9/11 Summit that proved to be hugely disappointing and helped reinforce the move to downgrade the Euro nations’ debt. Keystone’s target date for the France downgrade announcement hit dead-on today, as forecasted back in December.
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On 1/16/12, Monday, markets are closed in Observance of Dr. Martin Luther King Day holiday. National Retail Federation (NRF) forecasts much slower retail growth during 2012. The effects from the France downgrade are muted. The euro is lower and the European banks are moderately lower. Moody’s says a downgrade of France debt is now on their table. Draghi (ECB) says that the world should learn to live without rating agencies. S&P downgrades the EFSF but the European market reaction is muted.
On 1/17/12, Tuesday, the China growth rate is 8.9%, the slowest in 2 ½ years, but better than the consensus expected at 8.7%. The France, EFSF and other downgrades appear to have been priced into the markets. Fitch says that Greece is insolvent and should default before the 3/20/12 bond payment. The U.S. markets reopen after the three-day holiday weekend exploding higher. The SPX moves above 1300 but closes under at days end.
On 1/18/12, Wednesday, China home prices continue lower as well as foreign investment in China. Fitch warns of a two-notch downgrade coming for Italy. Italy announces higher than expected joblessness. The World Bank cuts the global growth outlook from 3.5% down to 2.4%. The IMF announces that a proposal to increase the fund to one trillion is under consideration. This quantitative easing talk causes the markets to catapult higher. GS earnings beat handily on the bottom line also creating a positive market tone. Markets continue to float upwards and the SPX prints above 1300. Egan-Jones, a rating agency, downgrades Germany but the equities market motor along without a negative reaction.
On 1/19/12, Thursday, the Greece talks continue. Sarkozy touts his stimulus plan which also should bolster his popularity ahead of elections. BAC and MS earnings are rosier than expected so the positive market tone continues.
On 1/20/12, Friday, Mario Monti lays out plan to boost Italy’s growth. Greece talks continue but there is no announcement today as traders expected. Moody’s plan on announcing bank downgrades including French banks. The markets continue along undaunted melting upwards into the close, the SPX is now above 1315, rising 26 points this week or 2%. Copper finally has a down day after seven straight up days.
On 1/21/12, Saturday, news sources are reporting that a key negotiator in the Greece debt talks has left Athens without a deal in place. Greece needs a second tranche of funding to stay afloat but has to come to a deal with private debt holders first. Sunday futures markets will be interesting.
…………….……the saga continues…………..
Looking ahead,
Continue watching the European 10-year bond market yields, especially Portugal that jumped 100 basis points last week and no one noticed. Greece’s deal to secure funding by 3/20/12 to avoid default is in jeopardy this weekend now adding further drama. Use the Italy 7%, Spain 6% and France 3.3%-ish level as a signal of trouble. Italy bond auctions occur on Thursday. The auctions last week went well for Europe and helped calm markets.
Global recovery is stalling. China real estate bubble is popping.
Another big earnings week on tap.
On 1/23/12, Greece resolution? Congress returns, typically a market negative. Projection for China easing via triple R’s to occur is 1/23/12 thru 2/8/12.
On 1/24/12 FOMC meeting begins. 2-Year Note Auction 1 PM. President Obama State of the Union speech in the evening at 9 PM EST.
On 1/25/12, Pending Home Sales 10 AM EST. 5-Year Note Auction 11:30 AM. Fed Rate Decision with two charts 12:30 PM and Press Conference 2:15 PM. Will there be any mention of QE3?
On 1/26/12, Italy Bond Auctions. Durable Goods Orders and Jobless Claims 8:30 AM. New Home Sales and Leading Indicators 10 AM. 7-Year Note Auction.
On 1/27/12, GDP 8:30 AM. Consumer Sentiment 9:55 AM.
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On 1/30/12, Italy and Belgium Bond Auctions.
On 1/31/12, EOM.
On 2/1/12, ISM Mfg Index.
On 2/3/12, Monthly Jobs Report.
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